Slide 1: First Quarter 2023 Investor Presentation
First Quarter 2023 Investor Presentation May 2, 2023 Information as March 31, 2023, unless otherwise noted
Slide 2: Safe Harbor Statement and Non-GAAP Measures
Safe Harbor Statement and Non-GAAP Measures Certain statements included in this presentation, including those regarding our earnings outlook, expected catastrophe losses, our investment strategies, our plans to implement additional rate actions, our plans relating to share repurchases and dividends,
Slide 3: Our Foundation: Financially sound company with strong strategy for profitable growth
Our Foundation: Financially sound company with strong strategy for profitable growth Financial Niche Multiline Longevity strength market model • 1945: Founded by Educators for • $13.4B in assets(1) • Educators have preferred • Business mix balanced Educators to sell auto insurance • $1.4B in net pre
Slide 4: Driven by a noble mission
Driven by a noble mission Mission We listen to and understand educators and those who serve our community. They are taking care of our children’s future. We believe they deserve someone to look after theirs. Vision We aspire to be the company of choice to provide financial solutions for all educator
Slide 5: Commitment to making a positive impact extends to all stakeholders
Commitment to making a positive impact extends to all stakeholders Our ESG commitment is ingrained in long-term strategy and day-to-day operations We are committed to doing our part to protect the • Cut Scope 1 and Scope 2 carbon emissions in half since 2019 environment, including a • Reducing amoun
Slide 6: Strategic emphasis on solutions tailored for educators at every life stage
Strategic emphasis on solutions tailored for educators at every life stage Retirement Preparing to retire Established educator New Issues: • How to manage educator Issues: retirement income • Worried about Issues: ensuring smooth • Need to plan wealth Pre-educator • Protecting assets retirement tran
Slide 7: Delivering value proposition for educator customers
Delivering value proposition for educator customers Focus on ‘PDI’ provided roadmap for fix-and-build and transformational stages Serving K-12 Educator Market Focused on “PDI” Products Homogenous customer set with attractive • Products designed to meet educators’ needs risk profiles and protect thei
Slide 8: Addition of worksite solutions capped steps taken to implement 'PDI'
Addition of worksite solutions capped steps taken to implement ‘PDI’ Completed key steps while successfully navigating pandemic environment and impact of external events in 2022 LEVERAGE LEADERSHIP: 2022 AND BEYOND Stage set for return to long- TRANSFORMATION: 2019-2021 term ROE Initiated pre-pandem
Slide 9: Stage set for accelerated shareholder value creation as market share expands
Stage set for accelerated shareholder value creation as market share expands Largest financial services company focused on meeting the needs of educators and others who serve our communities $1,250 Net Premiums and Contract Charges Earned (in millions) $1,000 25% $750 15% $500 School access 60% limi
Slide 10: PDI implementation in leadership phase to drive strong shareholder value creation
PDI implementation in leadership phase to drive strong shareholder value creation Focus in 2023 and beyond is distribution initiatives to drive market share expansion Product: Complete Infrastructure: Ongoing • We have built a robust set of products, relevant to our Distribution: Focus educator mark
Slide 11: Transformation has driven strong shareholder value creation
Transformation has driven strong shareholder value creation 8.2% compound annual growth in adjusted book value plus accumulated dividends since 2010 $48.12 $48.63 $44.09 $40.93 $35.73 $36.49 $32.91 $30.92 $28.44 • 15 consecutive years of dividend increases with current yield of 4.2%(1) • Target ~50%
Slide 12: Earnings trajectory illustrates clear path to sustainable double-digit ROE
Earnings trajectory illustrates clear path to sustainable double-digit ROE through profitable growth Core EPS* 10% average Below long-term annual trendline as inflation and EPS $4.24 financial market volatility offset benefits of growth + $3.40 education market focus, sustained sales momentum and $2
Slide 13: Profitable growth to drive return to double-digit ROE in 2024
Profitable growth to drive return to double-digit ROE in 2024 with core EPS approaching $4 2023 core EPS in the range of $2.00 to $2.30 (or core earnings of $84 million to $96 million), with core ROE near 6% • Continuing to target long-term 10% average annual EPS growth and sustained double-digit RO
Slide 14: Segment outlook reflects value of business diversification
Segment outlook reflects value of business diversification • Unchanged: Life & Retirement segment core • Updated: Property & Casualty segment core earnings between $67 million to $70 million in earnings between breakeven and $5 million in 2023, taking into account adoption of LDTI 2023 will reflect
Slide 15: Anticipating auto combined ratio between 97% and 98% in 2024
Anticipating auto combined ratio between 97% and 98% in 2024 Rate actions of almost 10% since the beginning of 2022; expect rate actions with a cumulative impact of 18% to 20% by year-end 2023 Minimum cumulative countrywide impact of actual and planned filed rate increases(1) 23% • 2023 Auto combine
Slide 16: LDTI transition update
LDTI transition update Horace Mann adopted ASU 2018-12 (LDTI) accounting standard on January 1, 2023; no impact to long-term earnings, underlying economics or cash flows • Adoption of new accounting standard enhances presentation of results for Life & Retirement and Supplemental & Group Benefit segm
Slide 17: Education market opportunity
Education market opportunity
Slide 18: Sizeable, growing opportunity in core K-12 education market
Sizeable, growing opportunity in core K-12 education market Additional opportunities to grow in legacy adjacent markets U.S. elementary and secondary education teachers, projected(1) • 7.5 million K-12 educators nationwide(1) - ~3.7M teachers in public and private schools; ~3.1M public school instru
Slide 19: K-12 education a homogeneous market with similar customer characteristics and goals
K-12 education a homogeneous market with similar customer characteristics and goals Reachable through both retail and worksite channels Desire to Responsible, Conservative Dedicated to improve risk-adverse educator total & loyal students and loyal compensation • Strong desire for • Passion for educa
Slide 20: Increased relevance for educators
Increased relevance for educators Helping educators protect what they have today and prepare for a successful tomorrow Retail solutions Worksite solutions • Solutions directly selected by • Solutions offered to educators an educator, often working with via their district employer a trusted financial
Slide 21: Expanded product set aligns with educator needs throughout life stages
Expanded product set aligns with educator needs throughout life stages Retirement Preparing to retire Established educator New educator Pre-educator Renters insurance Auto insurance Employer-sponsored life, disability and supplemental health insurance 403(b) retirement plan Home insurance Voluntary
Slide 22: Expanded distribution allows educators to engage with Horace Mann the way they choose
Expanded distribution allows educators to engage with Horace Mann the way they choose “Horace Mann Companies” brings together three organizations with decades of commitment to educators and strong reputations in the market Purchase Purchase through from local, employer- trusted agent sponsored progr
Slide 23: Positioned with significant cross-sell opportunities between worksite product lines
Positioned with significant cross-sell opportunities between worksite product lines Over time, cross sell with districts reached by retail businesses presents additional upside Worksite direct (NTA) 2022 premiums(1) Employer-sponsored (MNL) 2022 premiums(1) Property & Casualty 2022 premiums(1) Life
Slide 24: Uniquely positioned to take advantage of education market opportunities
Uniquely positioned to take advantage of education market opportunities Retail customers: Natural cross-sell: Our individual retail customers plus worksite direct P&C and L&R supplemental customers and SLS users are a natural cross-sell universe (including third-party) for our retail products Revenu
Slide 25: Strong retention across retail business lines illustrates value proposition
Strong retention across retail business lines illustrates value proposition for educators Retail customer retention Auto customer retention breakdown 100% 100% 96.1% 95.9% 95% 95% 95.0% 93.1% 90% 90% 87.2% 89.8% 85% 87.0% 85% 93.8% 90.6% 91.3% 83.5% 80% 80% 81.5% 75% 75% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q2
Slide 26: Business details and results
Business details and results
Slide 27: Diversified business delivered core EPS of $0.23 despite elevated catastrophe losses
Diversified business delivered core EPS* of $0.23 despite elevated catastrophe losses Household acquisition momentum strengthened again with strong sales across Retail and Worksite divisions Total revenues • Q1 net income of $0.16 per share and core earnings of $0.23 per share - Strong Supplemental
Slide 28: P&C segment: Providing coverage to protect what educators have today
P&C segment: Providing coverage to protect what educators have today Horace Mann 2022 revenues(1) Products • Auto, homeowners, renters and umbrella • Majority of P&C business is bundled auto Supplemental and home & Group Benefits • Partnerships through Horace Mann 21% General Agency Property & Casua
Slide 29: P&C segment: Remain on track to profitability targets
P&C segment: Remain on track to profitability targets as rate and non-rate underwriting actions take effect Net Premiums Written* Q1 results $682 $683 $636 $618 $627 • Segment core loss reflected elevated $608 catastrophe losses in line with preliminary announcement millions - Catastrophe losses con
Slide 30: Life & Retirement: Helping educators and their families plan for a strong financial future
Life & Retirement: Helping educators and their families plan for a strong financial future Horace Mann 2022 revenues(1) Products • 403(b) tax-qualified fixed, fixed index and variable annuities Supplemental • Horace Mann Retirement Advantage® open & Group architecture platform for 403(b)(7) and Bene
Slide 31: Life & Retirement: Segment earnings in line with expectations
Life & Retirement: Segment earnings in line with expectations Net annuity contract deposits* Q1 results • Segment core earnings of $14.0 million $439 $449 $419 $429 $429 $427 reflected - Net interest spread on fixed annuity business of 206 basis millions points in first-quarter 2023 compared to 286
Slide 32: Supplemental & Group Benefits segment: Providing options to address unexpected events
Supplemental & Group Benefits segment: Providing options to address unexpected events Horace Mann 2022 revenues(1) Products • Individual limited benefit products that are guaranteed renewable and portable - Products include cancer, heart, hospital and accident as well as Supplemental short-term supp
Slide 33: Supplemental & Group Benefits: Strong first quarter performance
Supplemental & Group Benefits: Strong first quarter performance Net Premiums Written and Contract Deposits* $70.2 $68.3 $68.3 $67.9 $67.2 Q1 Results $39.8 $37.5 $38.0 $38.4 $37.1 • Segment core earnings up 6.1% over the millions prior year’s first quarter, reflecting strong pre-tax margin due to con
Slide 34: High-quality, well-diversified investment portfolio
High-quality, well-diversified investment portfolio Constructed to support insurance liabilities through various market cycles Portfolio composition(1) • $5.4 billion fixed-maturity portfolio $6.6 billion fair value • 69% A-rated or higher Short-term U.S. Treasury • A+ weighted-average credit qualit
Slide 35: $624M Commercial Mortgage Loan Fund Portfolio
$624M Commercial Mortgage Loan Fund Portfolio Diversified pool of high-quality loans 1% 1% 4% Office • Majority of exposure is to open-ended 13% 25% funds comprised of senior loans Multi-Family Retail • Fund structure and diversification of 5% managers provide access to broader Industrial markets –
Slide 36: $422M Limited Partnership Fund Portfolio
$422M Limited Partnership Fund Portfolio Well diversified by strategy, vintage year, and potential volatility of returns 2% 5% 17% Corporate Mezz Hedge Funds • Inception-to-date performance strong 15% 2% Infrastructure Debt • 8.50% average annual return with relatively low volatility of returns Infr
Slide 37: Strong capital position, with more than adequate capital to grow businesses
Strong capital position, with more than adequate capital to grow businesses Capital Ratios • Capital management strategies support strong capital ratios 600% 0.0 - P&C loss reserves held at top half of 536% independent actuarial range 500% 505% - Conservative L&R product design 500% 0.5 - Supplement
Slide 38: Appendix
Appendix
Slide 39: Highly rated by all rating agencies
Highly rated by all rating agencies Education market focus, earnings diversification and capital strength cited Agency Rating Outlook (affirmed/reviewed) • Moody’s and S&P affirmed Horace Mann’s financial strength ratings in first- AM Best A Stable quarter 2023 Company (7/28/22) - Moody’s revised ou
Slide 40: 2023 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years
2023 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years Retention at $30 million, up from $25 million, first increase since 2011, with higher share of the lowest layer Casualty Property(1) $20M $175M ~400+ yrs 3rd LAYER 2nd LAYER CASUALTY $85M xs $90M CLASH & CONT
Slide 41: Horace Mann at a glance
Horace Mann at a glance Exchange ticker symbol NYSE:HMN Share Price $31.28(1) Weighted Average Diluted Shares (for 1Q23) 41.4 million Market Capitalization $1.3 billion(1) Annualized Dividend Per Share $1.32 Dividend Yield Per Share 4.2%(1) Adjusted Book Value Per Share (at March 31, 2023) $36.16 An